To budget hoteliers, tourism tax adds to Airbnb anxiety

Sri Ganesh said budget hotels were also struggling to fill up rooms as tourist traffic were said to have dropped, primarily due to the Goods and Services Tax (GST). — Picture courtesy of Wikipedia

KUALA LUMPUR, June 14 — Budget hotel operators here said they are not against the introduction of a nationwide tourism tax from next month, which the government has said will ultimately benefit the local industry.

However, Malaysian Budget Hotel Association (Mybha) president Sri Ganesh Michiel is apprehensive about the timing of the tax rollout, and stiff competition from Airbnb, the world's largest home-sharing network.

"We are already struggling with low room occupancy so it's a bad time to be introducing the new tax and the tourism industry is huge, why only expect the hoteliers to collect?" Sri Ganesh told Malay Mail Online when contacted yesterday.

He said budget hoteliers have been facing increasing competition over the past three years when the Airbnb service first made its local appearance.

Sri Ganesh believed that peer-to-peer home rental services like Airbnb stand to profit from a clause that exempts outlets with fewer than 10 room from paying the tax, which effectively makes them a cheaper option next to budget hotels.

“And the other thing is those [companies] like Airbnb, they don't have to pay tax and this will make people [prefer them over us]," Sri Ganesh said.

On top of that, Sri Ganesh said budget hotels were also struggling to fill up rooms as tourist traffic were said to have dropped, primarily due to the Goods and Services Tax (GST).

Data compiled from various banks and research firms showed consumer spending slowed down significantly since the introduction of the 6 per cent GST from April 2015.

Still, he said Mybha members were not entirely opposed to the idea of a tourism tax.

He said it would have been more acceptable if the government imposed the levy only on foreign tourists, or, alternatively, charge an exit tax.

"Why not collect exit tax from foreign tourists? They can do it at the airport. It's much easier and systematic," he said.

Many countries in the world collect tourism tax, though the system and rates vary according to individual nations.

However, most fall under the purview of their local governments which collect them through direct or indirect taxation.

In Malaysia some states, like Melaka and Kedah already collect tourism tax at tourist hotspots but the collections mostly have specific purposes like ecosystem preservation or cleanliness tax.

The new federal tourism tax is also meant to be redistributed for the national tourism industry through what Tourism Minister Datuk Seri Nazri Aziz described as promotions and marketing blitz, but industry players are sceptical.

"If we look at the existing tax system collected by local governments we know that the money is going into a specific fund meant to be used for, say, preserving nature or developing local tourism.

"But with the new tax the money will go to MoF and not the Tourism Ministry," Sri Ganesh said, referring to the Ministry of Finance by its abbreviation.

"So how do we know how the money would be spent and where will it go to? There's no certain way of knowing," he added.

The Mybha chief said an alternative to the idea would be to exempt hotels or tourism agencies from paying tax so the companies themselves can do the marketing.